A new approach to the 3 C’s offers a deeper, more accurate view of risk for subprime auto lending

Auto lenders are revising their marketing and risk assessment strategies, looking for ways to securely tap into this expanding market opportunity. That means they must find the fastest path to reaching the right consumers, at the right time, with the right offer—before their competition.

Could improving the accuracy of bad rate assessment in the subprime score range help?

Many lenders are returning to such traditional lending guidelines as the “Three Cs” – credit, capacity and collateral. It is generally accepted that problems in any of these areas can result in loan default, but for very different reasons. Auto lenders have historically embraced the three Cs as a risk measurement tool through traditional credit scoring, DTI ratios to address capacity, and vehicle value to address collateral. However, during the peak of the recession these measures didn’t prevent a rise in delinquencies, so a reassessment of the approach is warranted to ensure underlying risk patterns are addressed as effectively as possible. Leveraging alternative data can also offer a more accurate view of risk.

Through enhancing the 3 C’s, the benefits to subprime auto lenders are many, including:

Jenn joined Equifax Automotive Services in April of 2013 from the automotive lending industry, where she spent six years focused on both the automotive manufacturer (OEM) and indirect lending business for JP Morgan Chase. She brings over 17 years of diverse automotive experience, working for and with dealerships, industry associations and automotive finance companies. Jenn recently joined the marketing team as VP, Vertical Marketing Leader - Aut[...]

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